Canada's Telus reports 10 pct profit rise on wireless, TV growth

Alastair Sharp

5 Min Read

A pedestrian is reflected in the window of a Telus store while using a mobile phone in Ottawa February 11, 2011. REUTERS/Chris Wattie

TORONTO (Reuters) - Telus Corp (T.TO), one of Canada’s biggest telecom companies, posted a 10 percent rise in third-quarter profit on Friday, helped by strong growth in its wireless unit as well as steady customer additions for television and Internet service.

Its shares gained more than 2 percent, hitting a five-month high, as the company upped its dividend payout and said it was investing aggressively in building out its networks in order to maintain its growth profile over the longer term.

“In our view, these results and the dividend per share increase clearly show why Telus is our top pick,” Canaccord Genuity analyst Dvai Ghose wrote in a note to clients.

The Vancouver-based company said its net income was C$356 million ($341 million), or 56 Canadian cents a share, compared with C$323 million, or 49 cents a share, a year before.

Operating revenue rose 3.6 percent to C$2.87 billion.

On an adjusted basis, excluding restructuring and tax-related costs, the company earned 58 Canadian cents a share.

Analysts had on average expected Telus to earn 54 Canadian cents a share on revenue of C$2.90 million, according to Thomson Reuters I/B/E/S.

Telus competes against cable company Shaw Communications Inc SJRb.TO for television and Internet customers in Western Canada, and against Rogers Communications Inc (RCIb.TO) and BCE Inc’s BCE.To Bell for wireless subscribers across the country.

Its capital spending jumped almost 18 percent compared to a year ago, as it plows money into expanding and improving its broadband and cellular networks.

The federal government last month rejected Telus’ second attempt to buy struggling wireless startup Mobilicity, which is currently in creditor protection.

However it was allowed to buy another startup, Public Mobile, with roughly 280,000 mostly value-conscious customers. The Public Mobile deal has not yet closed.

While the airwaves Public bought in a 2008 auction were at the time deemed unattractive given the scarcity of devices that worked on the frequency, Telus Chief Executive Darren Entwistle said that had since changed, with the latest Apple (AAPL.O) iPhones able to utilize the airwaves.

GAINS WIRELESS MARKET SHARE

Telus said it signed up 106,000 net contract wireless subscribers, who typically pay more to use high-end smartphones, during the quarter. Bell had previously said it added almost 103,000, while market leader Rogers said it added 64,000.

Rogers has some 9.5 million wireless customers, while Telus and Bell have around 7.8 million each. Telus and Bell share a national wireless network, which helps both save money.

Telus said its average wireless customer paid C$62.49 a month for service, compared to Bell’s C$58.30 and Rogers at C$60.81.

Postpaid churn - the amount of those lucrative customers leaving each month - hit a six-year low of 0.99 percent in the quarter, it said.

“Another strong in-line quarter for wireless with a notable decline in postpaid churn,” RBC Capital Markets analyst Drew McReynolds said in a note.

The company added 34,000 TV customers, as its Internet-based Optik service continues to eat into the market dominance of Shaw’s cable offering. It added 19,000 broadband customers.

Telus, which is valued by investors for its dividend growth policy, also said it would increase its payout to 36 Canadian cents in January, compared to the 32 cents paid a year earlier.

CEO Entwistle said the company’s dividend policy and share buyback plan were complemented by spending to expand and improve its services.

“The decisions that we’re making to support the broadband technology investments ... are the type of things that we do today so that I can give you the answer in 2016 that you want to hear in terms of the extensibility of our dividend growth model in the foreseeable future from 2017 to 2019,” he said on a conference call with analysts.

Telus shares, which have won back most of the declines suffered several months back when it looked like U.S. giant Verizon Communications Inc (VZ.N) might enter the domestic market, were up 2.3 percent at C$37.13 in early afternoon trade on the Toronto Stock Exchange. That is their highest point since May 29.